152 FERC 61,219 UNITED STATES OF AMERICA FEDERAL ENERGY REGULATORY COMMISSION. 18 CFR Part 35. [Docket No. RM ]

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1 152 FERC 61,219 UNITED STATES OF AMERICA FEDERAL ENERGY REGULATORY COMMISSION 18 CFR Part 35 [Docket No. RM ] Collection of Connected Entity Data from Regional Transmission Organizations and Independent System Operators (September 17, 2015) AGENCY: Federal Energy Regulatory Commission. ACTION: Notice of proposed rulemaking. SUMMARY: The Federal Energy Regulatory Commission (Commission) proposes to amend its regulations to require each regional transmission organization (RTO) and independent system operator (ISO) to electronically deliver to the Commission, on an ongoing basis, data required from its market participants that would: (i) identify the market participants by means of a common alpha-numeric identifier; (ii) list their Connected Entities, which includes entities that have certain ownership, employment, debt, or contractual relationships to the market participants, as specified in this NOPR; and (iii) describe in brief the nature of the relationship of each Connected Entity. Such information will assist screening and investigative efforts to detect market manipulation, an enforcement priority of the Commission. The initiative would also assist market monitors for the RTOs and ISOs in their individual and joint investigations of potential cross-market manipulation. Unless the RTOs and ISOs request continuation of existing affiliate disclosure requirements based on a particularized need, the Commission expects

2 Docket No. RM ii that this new disclosure obligation will supplant all existing affiliate disclosures requirements contained in the RTOs and ISOs tariffs. The proposed definitional uniformity of the term Connected Entity across all of the RTOs and ISOs may help ease compliance burdens on market participants that are active in more than one RTO or ISO, and that are now required to submit affiliate information that may be unique to each of the organized markets in which they participate. DATES: Comments on the proposed rule are due [INSERT DATE 60 days after publication in the FEDERAL REGISTER]. ADDRESSES: Comments, identified by docket number, may be filed in the following ways: Electronic Filing through Documents created electronically using word processing software should be filed in native applications or print-to- PDF format and not in a scanned format. Mail/Hand Delivery: Those unable to file electronically may mail or hand-deliver comments to: Federal Energy Regulatory Commission, Secretary of the Commission, 888 First Street, NE, Washington, DC Instructions: For detailed instructions on submitting comments and additional information on the rulemaking process, see the Comment Procedures Section of this document.

3 Docket No. RM iii FOR FURTHER INFORMATION CONTACT: David Pierce (Technical Information) Office of Enforcement Federal Energy Regulatory Commission 888 First Street, NE Washington, DC (202) Kathryn Kuhlen (Legal Information) Office of Enforcement Federal Energy Regulatory Commission 888 First Street, NE Washington, DC (202) SUPPLEMENTARY INFORMATION:

4 152 FERC 61,219 UNITED STATES OF AMERICA FEDERAL ENERGY REGULATORY COMMISSION Collection of Connected Entity Data from Regional Transmission Organizations and Independent System Operators Docket No. RM NOTICE OF PROPOSED RULEMAKING (September 17, 2015) 1. In this Notice of Proposed Rulemaking (NOPR), the Federal Energy Regulatory Commission (Commission) proposes, pursuant to sections 222, 301(b), 307(a) and 309 of the Federal Power Act (FPA), 1 to amend its regulations to require each regional transmission organization (RTO) and independent system operator (ISO) to electronically deliver to the Commission, on an ongoing basis, data required from its market participants that would: (i) identify the market participants by means of a common alpha-numeric identifier; (ii) list their Connected Entities, which includes entities that have certain ownership, employment, debt, or contractual relationships to the market participants, as specified in this NOPR; and (iii) describe in brief the nature of the relationship of each Connected Entity. The uniform identification of market participants, together with the listing of entities that comprise a network of common interests, would enhance the Commission s efforts to detect and deter market manipulation, a central 1 16 U.S.C. 824v, 825(b), 825f(a), 825(h).

5 Docket No. RM objective of the Commission as identified in its FY Strategic Plan. 2 Unless the RTOs and ISOs request continuation of existing affiliate disclosure requirements based on a particularized need, the Commission expects that this new disclosure obligation will supplant all existing affiliate disclosures requirements contained in the RTOs and ISOs tariffs. 2. In the Strategic Plan, the Commission cited monitoring and surveillance activities as a key function in meeting the objective of detecting and deterring market manipulation. 3 In recent years the Commission has greatly enhanced its capabilities in this regard, having developed automated screens of market activities and set up analytical procedures to detect potential market manipulation. Understanding the ownership, employment, debt, and contractual relationships of market participants would provide context for such data, and help determine whether there appears to be a legitimate business rationale for seemingly anomalous trading patterns, or whether there may be market manipulation, fraud, or abuse. This in turn will further the Commission s goal of detecting and deterring possible market manipulation. As we explain below, the existing affiliate disclosure requirements do not appropriately enable the Commission to identify and monitor these business relationships. 2 Federal Energy Regulatory Commission Strategic Plan FY , Objective 1.2 (Mar. 2014), available at FY-2018-strat-plan.pdf. 3 Id.

6 Docket No. RM I. Background 3. Beginning in the late 1960s, the electric industry gradually transformed itself from one populated by mostly self-sufficient vertically integrated utilities compensated by cost-based rates, to competitive markets characterized by open transmission access, partial disaggregation of generation and transmission, and market-based rates. 4 Competitive markets brought with them the potential for market manipulation, and Congress, acting in response to the abuses characterizing the Western Energy Crisis of , passed the Energy Policy Act of 2005 (EPAct 2005). 5 This legislation, among other things, gave the Commission authority to address market manipulation, including the ability to assess substantial civil fines and seek criminal penalties In 2012, utilizing the authority granted by Congress under the FPA, the Commission expanded the tools available to staff to investigate market activity for potential manipulation. In Order No. 771, 7 the Commission required e-tag Authors and Balancing Authorities to ensure Commission access to their e-tags. And in Order 4 Enhancement of Electricity Market Surveillance and Analysis through Ongoing Electronic Delivery of Data from Regional Transmission Organizations and Independent System Operators, Order No. 760, 77 FR (May 7, 2012), FERC Stats. & Regs. 31,330, at P 2 (2012). 5 Pub. L. No , 119 Stat See 16 U.S.C. 825o (criminal penalties); 16 U.S.C. 825o-1 (civil fines). 7 Availability of E-Tag Information to Commission Staff, Order No. 771, 77 FR (Dec. 28, 2012), FERC Stats. & Regs. 31,339 (2012), order on rehearing and clarification, 142 FERC 61,181 (2013).

7 Docket No. RM No. 760, 8 the Commission required the RTOs and ISOs to electronically deliver to the Commission, on a regular basis, their existing data relating to physical and virtual offers and bids, market awards, resource outputs, marginal cost estimates, shift factors, financial transmission rights, internal bilateral contracts, uplift, and interchange pricing. These orders have provided needed tools for staff to monitor market activities. 5. The Commission has also been granted access by the Commodity Futures Trading Commission (CFTC) to its Large Trader Report, and the information contained therein has significantly added to the Commission s ability to carry out its enforcement responsibilities. In addition, on January 2, 2014, the Commission and the CFTC signed a new Memorandum of Understanding (MOU) to share information in connection with market surveillance and investigations into potential market manipulation, fraud, or abuse. 9 This MOU establishes procedures for sharing information of mutual interest related to market surveillance and investigative matters, while maintaining confidentiality and data protection Nonetheless, despite increased access to trading data, the Commission cannot fully utilize this information in order to detect and deter market manipulation because of 8 Order No. 760, FERC Stats. & Regs. 31,330 at PP Memorandum of Understanding Between the Commodity Futures Trading Commission and the Federal Energy Regulatory Commission Regarding Information Sharing and Treatment of Proprietary Trading and Other Information (Jan. 2, 2014), available at 10 Id.

8 Docket No. RM uncertainty regarding the identity of a given market participant, which may trade under different identifiers in different markets and venues. The Commission also lacks a clear window into the relationships between market participants and other entities, which can be complex. Without an understanding of which companies share ownership or debt interests, or who may function in key employment or other contractual roles (such as asset management), it can be difficult to ascertain which individuals or companies may benefit from a given transaction or, indeed, who may be jointly participating in a common course of conduct. 7. Currently, each RTO and ISO requires market participants to provide it with a list of the participant s affiliates. 11 However, requirements vary as to the nature of a reportable affiliate relationship and the frequency for updating the information. In addition, for purposes of ferreting out potential market manipulation, it is important to explore relationships that extend beyond corporate affiliation. Such additional relationships may involve contractual relationships such as tolling and asset management agreements, or debt structures that are convertible to ownership interests. 11 See, e.g., the following sections from the tariffs of the RTOs/ISOs: California Independent System Operator Corporation (CAISO): Section 39.9 and (for congestion revenue rights); ISO New England Inc. (ISO-NE): Section I.3.5; Midcontinent Independent System Operator, Inc. (MISO): Attachment L.1.A.5 (credit application evaluation disclosure requirement), Attachment L.1.B.5 (ongoing credit evaluation disclosure requirement); New York Independent System Operator, Inc. (NYISO): Section 2.15; PJM: Section (Interconnection customer affiliate disclosure requirement), Attachment Q 1.A.5 (credit application evaluation disclosure requirement), Attachment Q 1.B.5 (ongoing credit evaluation disclosure requirement).

9 Docket No. RM The existing affiliate disclosure rules do not provide the tools necessary for the Commission to sufficiently monitor these increasingly complex business relationships that impact our jurisdictional markets. Thus, the Commission believes it is desirable to use a new term, one that is free of any associations that have developed around the term affiliate, and one that is uniform across all of the RTOs and ISOs, to describe a relationship of interest in probing for potential market manipulation. We propose the term Connected Entity, and further propose to make the definition of that term uniform across the organized electric markets. II. Discussion Need for Connected Entity Information 9. The Commission employs a variety of screens to identify anomalous trading. When it detects such anomalies, it attempts to determine whether the behavior is legitimate market activity. It does this in large part by analyzing the circumstances surrounding the activity, including trading patterns and trader explanations. Some patterns that have emerged to date are: limited risk or riskless combinations of trades to enhance the value of a position or portfolio, such as wash trades; repetitive, uneconomic physical trading or flows to benefit a position; trading to affect the formation of an index price; withholding physical generation to benefit a financial and/or physical position; and using virtual bids to benefit a financial and/or physical position. 10. Rather than performing a trade or other action that results in a direct benefit to itself, a market participant might instead take actions that benefit another entity that bears a financial or legal relationship to it. Entities under common control, whether by

10 Docket No. RM ownership, beneficial interest, or contractual relationships, might also collude to set prices by taking positions that together result in a market manipulation. An understanding of these relationships is crucial in exploring the design and possible purposes behind a trading pattern, from which inferences of intent can be drawn and investigated. The existing affiliate disclosure requirements imposed through the RTOs and ISOs tariffs do not capture all of these business relationships. 11. As evidence of intent is critical in establishing whether there has been market manipulation, 12 the Commission can better monitor and protect the markets from wrongdoing if these relationships are fully known. Moreover, more complete information about these relationships will reduce the number of informal inquiries in response to false positive surveillance screen trips that may result from an incomplete picture of market participants incentive structures. Sources and Completeness of Connected Entity Information 12. Although there are a few third-party sources of public information that contain data about the affiliate relationships of entities trading in the electric energy markets, their information and manner of collection is insufficient for the Commission s market monitoring responsibilities. These sources include vendors such as Dun & Bradstreet, 12 In Order No. 670, the Commission promulgated regulations 18 CFR 1c.1 and 1c.2, which prohibit manipulation in the natural gas and electric energy markets. In that order, the Commission stated that any violation of the Final Rule requires a showing of scienter. Prohibition of Energy Market Manipulation, Order No. 670, FERC Stats. & Regs. 31,202, at P 52 (2006).

11 Docket No. RM SNL Financial, and Ventyx. The primary service provided by these companies is tracking trading information, not compiling affiliate data, and their affiliate information is generally derived from public sources that do not cover all market participants. Further, whether such information is current or complete cannot be ascertained from the listings. Nor do such listings include entities that are connected by contractual relationships, rather than ownership. For all these reasons, an up-to-date, reliable, and complete listing of Connected Entities cannot be obtained from these third-party sources. 13. Obtaining Connected Entity data from RTOs and ISOs leaves unaddressed similar data from entities operating outside the organized electric markets. However, the Commission has estimated, using Electric Quarterly Report (EQR) data and existing affiliation information gleaned from market-based rate filings and other available sources, that approximately 90 percent of the reported wholesale sales of electricity subject to the Commission s jurisdiction are made either by market participants in one or more of the six RTOs and ISOs, or by companies related by ownership to such a market participant. 13 Therefore, access to Connected Entity data for all the market participants in each of the RTOs and ISOs would provide most of such data for all the transactions of interest in the Commission s electric manipulation screening. We invite comment on the 13 These RTOs and ISOs are: ISO-NE, NYISO, PJM, MISO, Southwest Power Pool, Inc., and CAISO. The Electric Reliability Council of Texas is non-jurisdictional and not included in the calculation. Staff determined this percentage by examining the Electric Quarterly Reports, which must be filed by all public utilities and by non-public utilities that trade above a de minimus amount. See 18 CFR 35.10(b) (2015).

12 Docket No. RM desirability and feasibility of expanding our proposal to require the submission of Connected Entity information from non-rto/iso market participants, and on any difficulties commentators might perceive to exist in doing so. 14. The Commission recognizes that this proposal would place additional burden on market participants to implement the new reporting requirement and to submit the Connected Entity information to the RTOs and ISOs as proposed. However, we believe that the benefits of this proposal will outweigh the additional burden imposed on market participants. Moreover, as noted above, each of the six RTOs and ISOs already requires its market participants to submit data identifying certain affiliate relationships. It is possible that some, if not all, market participants will be able to use its existing processes for reporting affiliate information to the RTOs and ISOs to lessen the burden of this proposed reporting. For market participants that are active in more than one market, it is also possible that the burden of making a uniform Connected Entity filing in all those markets, once the initial implementation period is over, would be no greater than the current burden of making multiple affiliate filings, each of which is unique to its particular RTO or ISO. For participants in only one market, we recognize that there will likely be an increase in the administrative time needed for compliance. As for the RTOs and ISOs themselves, we believe they would incur the initial implementation costs required to make compliance filings to amend their tariffs to conform the filed information to the new Commission standards, and revising their collection processes to be consistent with those standards.

13 Docket No. RM Authority to Acquire Connected Entity Information 15. The Commission has the authority to require the type of record keeping and submittals contemplated in this NOPR. As discussed below, the Commission s antimanipulation authority under section 222 of the FPA, taken together with its investigative authority under section 307(a) of the FPA, its administrative powers under section 309 of the FPA, and its inspection and examination authority under section 301(b) of the FPA, provides ample basis for accessing Connected Entity data. 16. Section 222 of the FPA grants the Commission authority over the prohibition of market manipulation in connection with the purchase or sale of electric energy and transmission subject to the Commission s jurisdiction. 14 It also prohibits manipulation by any entity, including entities exempted from the Commission s rate-related jurisdiction. Section 301(b) of the FPA provides that the Commission shall at all times have access to, and the right to inspect and examine all accounts and records of public utilities, 15 which includes RTOs and ISOs. Section 309 of the FPA grants the Commission the authority to perform any and all acts, and to prescribe, issue, make, amend, and rescind such orders, rules and regulations as it may find necessary and appropriate to carry out the provisions of [the FPA]. 16 And section 307(a) of the FPA provides that the Commission has U.S.C. 824v U.S.C. 825(b) U.S.C. 825(h).

14 Docket No. RM authority to investigate any facts, conditions, practices, or matters it may deem necessary or proper to determine whether any person, electric utility, transmitting utility, or other entity may have violated or might violate the FPA or the Commission s regulations. 17 It also has investigatory authority to aid in the enforcement of the FPA or the Commission s regulations, or to obtain information about wholesale electric energy sales or the transmission of electric energy in interstate commerce. 18 This investigatory authority is not limited to a particular case or controversy, but allows an agency to investigate merely on suspicion that the law is being violated, or even just because it wants assurance that it is not The Commission has already required the RTOs and ISOs to provide this type of information to the Commission. Most notably, in Order No. 760, the Commission required the RTOs and ISOs to electronically deliver to it, on an ongoing basis, data relating to physical and virtual offers and bids, market awards, resource outputs, marginal cost estimates, shift factors, financial transmission rights, internal bilateral contracts, uplift, and interchange pricing. 20 The information sought under this NOPR would typically be provided with less frequency than that which the RTOs and ISOs submit U.S.C. 825f(a). 18 Id. 19 United States v. Morton Salt, 338 U.S. 632, 642 (1950). 20 See Order No. 760, FERC Stats. & Regs. 31,330 at Summary.

15 Docket No. RM under Order No And the submittal of Connected Entity data would be transmitted through the same channels as the RTOs and ISOs already employ for Order No. 760 data. Additional Benefits and Confidentiality of Connected Entity Data 18. Establishing common identifiers and a uniform definition of Connected Entity, as is proposed in this NOPR, would have the additional benefit of assisting the RTO/ISO market monitors in their responsibilities to oversee the markets. Market monitors could assess cross-market transactions and compare their data with that produced by their neighboring market monitors, assured that the data was accurate and consistent Understanding the relationship between connected entities can be an important aspect of the Commission s ex post analysis, which is a critical element of the marketbased rate program. In Lockyer, the Ninth Circuit cited with approval the Commission s dual requirement of an ex ante finding of the absence of market power and sufficient post-approval reporting requirements, finding that the Commission does not rely on ex ante market forces alone in approving market-based rate tariffs. In particular, the court found that the ongoing oversight and timely reconsideration of market-based rate 21 See Southwest Power Pool, Inc., 137 FERC 61,046 at P 19 (2011) ( [T]he Commission clarifies that Market Monitoring Units, RTOs, and ISOs may communicate referral information with each other across regions...the Commission strongly encourages this type of communication, as long as reasonable precautions are taken to ensure that all referral information remains non-public. ); see also New York Independent System Operator, 136 FERC 61,116 (2011).

16 Docket No. RM authorization under section 205 of the FPA enables the Commission to meet its statutory duty to ensure that all rates are just and reasonable The Commission anticipates that submitting Connected Entity data would not place market participants under increased risk in relation to the disclosure of confidential or proprietary information. Some of the information to be gathered by the RTOs and ISOs from participants is already publicly available. This would include, in the case of publicly-traded companies, data found in their Securities and Exchange Commission (SEC) filings; in the case of contractual control over a jurisdictional asset, the data would generally be available through EQR reporting requirements. To the extent, however, that Connected Entity information is not already public, we intend that the collection of Connected Entity information be treated as non-public, to the same extent as is Order No. 760 data and any other investigatory material submitted under Part 1b of the Commission s regulations Connected Entity information that is commercially sensitive, such as all or part of the contractual arrangements among entities, may satisfy the requirements of exemption 4 of the Freedom of Information Act (FOIA), which protects trade secrets and commercial or financial information obtained from a person [that is] privileged or confidential Cal. ex rel. Lockyer v. FERC, 383 F.3d 1006 (9th Cir. 2004). See also Cal. v. FERC, 784 F.3d 1267 (9th Cir. 2015) CFR pt. 1b (2015) U.S.C. 552(b)(4); accord 18 CFR (d) (2015).

17 Docket No. RM The non-public information to be gathered under the proposed rule may also fall within the ambit of FOIA exemption 7, which protects certain records and information compiled for law enforcement purposes. 25 Proposed Definition of a Connected Entity 22. Over the years, the term affiliate has been used frequently in tariffs and regulations, but not always with exactly the same definition. The term has also usually centered on relationships involving control by virtue of an ownership interest. 26 However, in carrying out the Commission s responsibility to oversee the markets for possible market manipulation, other relations may be equally worthy of examination. We thus propose an entirely new term, to be used in connection with investigatory data gathered for the purposes identified in this NOPR, that of Connected Entity. We propose to revise 18 CFR 35.28(g)(4) to define Connected Entity as follows: 23. A Connected Entity, which includes natural persons, is one which stands in one or more of the following relationships to a market participant: a. An entity that directly or indirectly owns, controls, or holds with power to vote, 10 percent or more of the ownership instruments of the market participant, including but not limited to voting and non-voting stock and general and limited partnership shares; or an entity 10 percent or more of whose ownership 25 5 U.S.C. 552(b)(7); accord 18 CFR (g) (2015). 26 See, e.g., 18 CFR 35.36(a)(9) (2015).

18 Docket No. RM instruments are owned, controlled, or held with power to vote, directly or indirectly, by a market participant; or an entity engaged in Commissionjurisdictional markets that is under common control with the market participant; b. The chief executive officer, chief financial officer, chief compliance officer, and the traders of a market participant (or employees who function in those roles, regardless of their titles); c. An entity that is the holder or issuer of a debt interest or structured transaction that gives it the right to share in the market participant s profitability, above a de minimis amount, or that is convertible to an ownership interest that, in connection with other ownership interests, gives the entity, directly or indirectly, 10 percent or more of the ownership instruments of the market participant; or an entity 10 percent of more of whose ownership instruments could, with the conversion of debt or structured products and in combination with other ownership interests, be owned or controlled, directly or indirectly, by a market participant; or d. Entities that have entered into an agreement with the market participant that relates to the management of resources that participate in Commission-jurisdictional markets, or otherwise relates to operational or financial control of such resources, such as a tolling agreement, 27 an energy management agreement, an asset 27 Tolling agreements are common in the energy industry, and in essence function as leasing contracts or options on a generating plant wherein the toller has the right to the plant output at his or her discretion.

19 Docket No. RM management agreement, 28 a fuel management agreement, an operating management agreement, an energy marketing agreement, or the like. 29 We invite comment on the appropriate threshold for a de minimis share of a company s profits. Legal Entity Identifiers 24. In the past, the Commission has considered methods to ensure that there is no confusion as to the identification of entities subject to its jurisdiction. For example, it formerly required usage of the DUNS identification system in EQR filing requirements. However, the Commission found that system to be an imprecise tool for the purpose, and 28 Asset management agreements, in general, are contractual relationships where a party agrees to manage fuel supply and delivery arrangements, including transportation, for another party, and to consume the electricity produced or share in some fashion in the revenues from the sale of that electricity. 29 As the Commission observed in Order No. 697, energy/asset managers provide a variety of services, including, but not limited to, operating generation plants (sometimes under tolling agreements), acting as billing agents, bundling transmission and power for customers, and scheduling transactions. Market-Based Rates for Wholesale Sales of Electric Energy, Capacity and Ancillary Services by Public Utilities, Order No. 697, FERC Stats. & Regs. 31,252, clarified, 121 FERC 61,260 (2007), order on reh g, Order No. 697-A, FERC Stats. & Regs. 31,268, clarified, 124 FERC 61,055, order on reh g, Order No. 697-B, FERC Stats. & Regs. 31,285 (2008), order on reh g, Order No. 697-C, FERC Stats. & Regs. 31,291 (2009), order on reh g, Order No. 697-D, FERC Stats. & Regs. 31,305 (2010), aff d sub nom. Mont. Consumer Counsel v. FERC, 659 F.3d 910 (9th Cir. 2011), cert. denied, 133 S. Ct. 26 (2012). Regardless of the label attached to a particular contract, all such services would fall within the ambit of the reporting requirement proposed in this NOPR.

20 Docket No. RM removed the requirement in At that same time, it considered various alternatives to the use of DUNS numbers, but found none that would be adequate However, a relatively new system is rapidly becoming the globally accepted method to ensure accurate identification of legal entities. That system involves the establishment of Legal Entity Identifiers (LEIs), which are unique IDs assigned to single entities. In this country, adoption of the LEI system has been accelerated in response to the Dodd-Frank Act, which mandated initiatives to improve the quality of financial data available to regulators and others. 32 The Office of Financial Research (OFR), which was created under the Dodd-Frank Act, is leading the effort to establish uniform LEIs and several federal agencies involved in the regulation of financial transactions have, or are in the process of, mandating the use of LEIs for certain purposes. Among these are the CFTC and the SEC, which now require their use for certain swaps-related activities Electricity Market Transparency Provisions of Section 220 of the Federal Power Act, Order No. 768, FERC Stats. & Regs. 31,336, at P 171 (2012); orders on reh g and clarification, Order No. 768-A, 143 FERC 61,054 (2013) and order on reh g, Order No. 768-B, 150 FERC 61,075 (2015). at 5343 (a). 31 Order No. 768, FERC Stats. & Regs. 31,336 at P Dodd-Frank Wall Street Reform and Consumer Protection Act, 12 U.S.C. 5301, 33 See, e.g., 17 CFR 45.4, 45.6 (2015) (CFTC); Regulation SBSR Reporting and Dissemination of Security-Based Swap Information, 80 FR 14564, 17 CFR Part 242 (2015) (SEC) (published in the Federal Register as a final rule on March 19, 2015, with an effective date of May 18, 2015).

21 Docket No. RM LEIs are issued by Local Operating Units (LOUs) of the Global LEI System, and as of December 31, 2014, over 330,000 entities from 189 countries had obtained LEIs from 20 operational issuers endorsed by the LEI Regulatory Oversight Committee (ROC). The Global LEI Foundation was established in June of 2014 as a not-for-profit organization overseen by the ROC to act as its operational arm, and which maintains a centralized database of LEIs and corresponding reference data. 27. Obtaining an LEI is relatively inexpensive (approximately $250, with annual upkeep fees of approximately $150). Application is made by a legal entity, such as a corporation or partnership, and the LOU verifies authenticity of the entity by checking official governmental records. It then assigns to it an LEI, a 20-digit alpha-numeric code unique to that entity. A given alpha-numeric string is thus a permanent identifier, and is also exclusive; that is, no other entity is assigned that LEI, and the entity itself may not obtain another LEI We believe that the establishment of a reliable, standard identification system will greatly benefit staff s ability to conduct investigations of trading patterns in the energy markets. It appears to us that the use of LEIs is the best method to achieve this goal. We therefore propose that the RTOs and ISOs require their market participants to obtain 34 See the LEI ROC website for further information on the LEI identifier system. The Legal Entity Identifier Regulatory Oversight Committee LEI ROC,

22 Docket No. RM LEIs, and to report in their Connected Entity Data filing their own LEI and the LEI of each of their Connected Entities, if the Connected Entity has obtained one. However, the LEI system is still relatively new, and we invite comments on the feasibility of its use, on whether any other system besides LEIs would be a preferable method of achieving uniform identification, and on whether waivers might be appropriate in given situations. III. Requirements for Collection of Connected Entity Data 29. As part of this rulemaking, we propose to require the submission from the RTOs and ISOs of Connected Entity information pertaining to each of its market participants. 35 To meet this obligation, we propose that each RTO and ISO make a compliance filing setting forth in its tariff the requirement that its market participants submit to it a list of their Connected Entities, in the format approved by the Commission. This list would include all of a market participant s Connected Entities, as defined above. The Connected Entities need not be engaged in activities in the same markets as the market participant for their inclusion to be required. The RTOs and ISOs would in turn transmit this information to the Commission in its native format. 30. As a condition of participating in any of the RTO/ISO markets, the market participants would have to have on file with that RTO or ISO their Connected Entity data, which must be updated within 15 days of a change in status of the data. In addition, it 35 For this purpose, the term market participant includes all entities that participate in any of the various markets of the RTO and ISO in question, whether as a seller or a buyer.

23 Docket No. RM would be a condition of participation for each market participant to certify, on a yearly basis, that its Connected Entities filed data is comprehensive and accurate. 31. We propose that the RTOs and ISOs include in their tariffs the authority (although not the obligation) to audit market participants to determine if their submitted Connected Entity data is accurate, complete, and up to date. Commission staff may also from time to time conduct audits for this purpose. 32. As discussed above, we also propose that each market participant be required to acquire an LEI, and include its own LEI and the LEIs of each of its Connected Entities (if known) on its submitted Connected Entity list. 33. We further propose that the information requested be delivered to the RTOs and ISOs in a form and manner acceptable to the Commission. By way of illustration, we envision that the following formats for submission of Connected Entity data would be mandated: A table that contains rows with columns identifying the market participant by LEI, legal name, RTO or ISO, and RTO/ISO assigned identifier, if any. If there is more than one RTO/ISO identifier, there would be a separate row for each, with the preceding columns remaining the same. If the market participant participates in more than one RTO or ISO, there would be additional rows setting forth all the categories mentioned for each RTO/ISO. Thus, a row would appear as follows (columns separated by a star): LEI of market participant (MP)* Legal Name of MP * RTO/ISO * RTO/ISO Identifier of MP

24 Docket No. RM A table or tables that disclose the market participant s relationships with each of its Connected Entities. Each row would address a single Connected Entity and the type of relationship with the market participant (ownership, employee, debt, contract). The LEI and the legal name of the market participant would be placed in the first two columns, respectively, and the LEI and the legal name of the Connected Entity in the third and fourth columns, respectively, and the type of relationship in the fifth column. For ownership, the date the direct, indirect or beneficial ownership reached 10 percent would be stated, as well as the total ownership as of the date of the report. For employees, which might be set forth in a separate table, the full legal name of the employee would be stated and the person s title and date of hire. For debt, the date the debt was incurred would be stated, and the debt holder and indebted party identified. For contracts, the start and end date of the contract would be stated as well as a brief descriptor of the contract type (tolling, asset management, etc.). If there are multiple relationships with the same Connected Entity, separate rows would be used for each. Thus, a row would appear as follows: LEI of MP * Legal Name of MP * LEI of Connected Entity * Legal Name of Connected Entity * relationship type (ownership, employee, debt, contract). This table would also provide, whether by footnote or other reference means, a more detailed description of the particular relationship given. For a contract, for instance, the major provisions of the contract would be listed, such as effective date, term, renewal provisions, and matters pertinent to the type of contract, such

25 Docket No. RM as heat rate curve for a tolling agreement, the MW or MWh curves for a power purchase agreement, together with identification of the generator or plant involved, the nature of any output sharing, and the like. 34. The repetition of cells necessitated by the foregoing format, while it will make the document physically longer than might otherwise be the case, is needed so that the appropriate pairing of entities can be presented in a machine-readable manner. An appendix is included with this NOPR to provide some examples of how these submittals might be structured. We invite comments on formatting suggestions, as well as on the substantive matters set forth in this Notice of Proposed Rulemaking. 35. Finally, we propose that in their compliance filings, RTOs and ISOs list all affiliate information disclosure requirements. As we anticipate that the Connected Entity submissions will provide the RTOs and ISOs with as much and more information as they currently receive from the existing affiliate disclosures, we propose eliminating all existing affiliate disclosure requirements. However, if there is some particularized need that would not be met by the Connected Entity submissions, the RTOs and ISOs may request in their compliance filings to retain any such disclosure requirements, in which case they would need to include justifications for such retention. Insofar as possible, duplicative information submission should be avoided. We also solicit comments as to whether it would be feasible and more efficient for the RTOs and ISOs to utilize the Connected Entities information that would be submitted through this proposal for the same purposes that they currently use the information provided through their existing affiliate disclosure requirements. In particular, we solicit comments regarding whether

26 Docket No. RM replacing existing affiliate disclosure requirements in the RTO and ISO tariffs with the Connected Entity submission obligations will adversely affect implementation of other provisions of the RTO and ISO tariffs. If so, then how? Such comments may also address whether any changes should be made to the data table formats to allow RTOs and ISOs to utilize Connected Entities information for other purposes. IV. Information Collection Statement 36. The collections of information contained in this proposed rule are being submitted to the Office of Management and Budget (OMB) for review under section 3507(d) of the Paperwork Reduction Act of 1995, 44 U.S.C. 3507(d). We solicit comments on the Commission s need for this information, whether the information will have practical utility, the accuracy of the provided burden estimates, ways to enhance the quality, utility, and clarity of the information to be collected, and any suggested methods for minimizing respondents burden, including the use of automated information techniques. Respondents subject to the filing requirements of this proposed rule will not be penalized for failing to respond to these collections of information unless the collections of information display a valid OMB control number. 37. The proposed rule does not require entities other than RTOs/ISOs to report information to the Commission. The RTOs/ISOs will gather the required data from the

27 Docket No. RM market participants directly. However, we include burden estimates not only for RTOs/ISOs but also for market participants and Connected Entities We recognize that there will be an initial implementation burden associated with providing the Commission the requested data. This includes submitting a compliance filing to the Commission. We estimate 30 hours for each RTO/ISO to prepare the filing at a cost of $3,896 per filer. 39. Each RTO and ISO already submits electronic market data to the Commission in accordance with Order No We propose that these same channels be used to handle the relatively small increase in data submission proposed under this rulemaking. RTO/ISO staff will need to add additional tables to their databases and make provisions 36 The estimated hourly cost (salary plus benefits) provided in this section are based on the figures for May 2014 posted by the Bureau of Labor Statistics for the Utilities sector (available at The hourly estimates for salary plus benefits are: Legal (code ), $ Computer and mathematical (code ), $58.25 Information systems manager (code ), $94.55 IT security analyst (code ), $63.55 Auditing and accounting (code ), $51.11 Information and record clerk (Referred to as administrative work in the body) (code ), $37.50.

28 Docket No. RM for those tables to be included in regular transmissions. We estimate eight hours for each RTO/ISO to make these additions at an average cost of $624 per filer Each RTO/ISO will also need to modify its current process for accepting information from market participants. We estimate 320 person-hours (costs weighted as previously described) for each RTO/ISO to make these changes at an average cost of $24,960 each. 41. Incremental, ongoing maintenance costs for RTOs/ISOs are assumed to be minimal. We estimate maintenance to require 40 person-hours per year at an average annual cost per RTO/ISO of $3, This NOPR also proposes that RTOs/ISOs have the option to audit market participants to verify the accuracy and completeness of their submissions. If each of the six RTOs/ISOs chooses to audit an average of 10 market participants per year, we estimate this to require 40 hours per audit for a total annual auditing burden per RTO/ISO of 400 hours and annual cost of $20, Market participants, through their affiliate disclosures, already submit information about some of their Connected Entities to the RTOs/ISOs. This proposed rule enlarges the information to be collected and standardizes its format. It is estimated that for 37 The following weightings were applied to estimate the average hourly cost (salary plus benefits) of $78.00: Legal staff, 1/6 Information systems manager, 1/6 Computer and mathematical, 1/3 Information security analyst, 1/3.

29 Docket No. RM multi-market participants, the additional cost of initial compliance and the ongoing costs of maintaining that information will be somewhat offset by the savings of standardization across the several RTOs/ISOs. This NOPR proposes that market participants obtain and maintain an LEI, which we understand currently costs about $250 to obtain and $150 per year thereafter to maintain. While there will be an initial implementation burden associated with providing the RTOs/ISOs the requested data, these costs may vary widely from participant to participant largely in proportion to the size of the entity. Since the data related to the Connected Entity is information readily available to the market participant, the costs of gathering the data is expected to be largely administrative in nature with some minimal review by legal staff. 38 We estimate that the average market participant will initially require four hours to register for an LEI and to collect, standardize, and provide the requested data to the RTO/ISO. We estimate the four hours of burden to cost $168 annually per market participant. (The cost of obtaining and maintaining the LEI is separate.) 44. The proposed rule requires market participants to update and submit Connected Entity data after material changes and annually. We estimate that this ongoing burden will require less time than the initial collection but may occur more than once per year. We estimate three hours for each market participant to maintain their LEI registration and 38 Using the average hourly cost of salary plus benefits provided above, the following weightings were applied to estimate the average hourly cost of $42.12: 95 percent information and record clerk, 5 percent legal.

30 Docket No. RM to collect, update, standardize, and transmit the requested data to the RTO/ISO. This burden would be largely administrative (95 percent) with some minimal review by legal staff (5 percent). We estimate the total burden to be $126 per participant. 45. Market participants or Connected Entities may, from time to time, seek to confirm the accuracy of information concerning them that has been submitted to an RTO/ISO by other market participants. We conservatively estimate that one-fourth of market participants and Connected Entities will seek to confirm such information. Such confirmations would be largely administrative (95 percent) with some minimal review by legal staff (5 percent). We estimate that these confirmations will take approximately one hour for an average burden of $42 per market participant or Connected Entity seeking confirmation. Connected entities may also respond to requests for information from market participants. We estimate that each Connected Entity will spend one hour responding to these requests. Such responses would be largely administrative (95 percent) with some minimal review by legal staff (5 percent). We estimate that this activity will take approximately one hour for an average burden of $42 per Connected Entity. 46. The following table summarizes the estimated burden and cost increases rounded to the nearest dollar in FERC-921, due to the proposed rule:

31 Docket No. RM The table above contains estimates of the number of market participants and the number of Connected Entities per market participant. We estimate that there are 6,000 market participants in the RTO/ISO markets, based on an analysis of data submitted by the RTOs/ISOs in accordance with Order No We estimate the number of Connected Entities to be an additional 9,000 companies, based on an analysis of data from Ventyx, a third party vendor which supplies ownership information about market participants.

32 Docket No. RM Information Collection Costs: We estimate the initial and ongoing cost of compliance with the NOPR s proposed requirements for each type of respondent as follows: RTO/ISO o Initial Burden: 358 hours, $29,480. o Ongoing Burden (starting year one): 560 hours, $32,924. Market Participant o Initial Burden: 4 hours, $168 plus $250 to acquire LEI. o Ongoing Burden (starting year two): 5 hours, $201, plus $150 to maintain LEI. Connected Entity o Ongoing Burden (starting year one): 1.25 hours, $53. Title: FERC-921, 39 Ongoing Electronic Delivery of RTO/ISO Data. Action: Proposed revisions to existing information collection. OMB Control No.: Respondents for this Rulemaking: RTOs and ISOs; market participants; Connected Entities. Frequency of Information: Initial implementation, compliance filing, and periodic updates (at least annually). 48. Necessity of Information: As wholesale electricity markets continue to develop and evolve, new opportunities arise for anti-competitive or manipulative behavior. The Commission s market monitoring and surveillance capabilities and associated data 39 OATT compliance filings (like the one-time compliance filing here) are normally included under FERC-516 (OMB Control No ). However, the reporting requirements (including the compliance filing) contained in this proposed rule in Docket No. RM will be included in FERC-921.

33 Docket No. RM requirements must keep pace with market developments and evolve along with the markets. The data discussed in this NOPR will allow the Commission to more effectively identify and address such behavior; to identify ineffective market rules; to better inform Commission policies and regulations; and thus to help ensure just and reasonable rates. 49. Internal Review: The Commission has made a preliminary determination that the proposed revisions are necessary to keep pace with ever-changing possibilities for anti-competitive or manipulative behavior and to better inform Commission policies and regulations, and thus to ensure that rates are just and reasonable. The Commission has assured itself, by means of its internal review, that there is specific, objective support for the burden estimate associated with the information requirements. 50. Interested persons may obtain information on the reporting requirements by contacting the Federal Energy Regulatory Commission, Office of the Executive Director, 888 First Street, NE, Washington, DC [Attention: Ellen Brown, DataClearance@ferc.gov, phone: (202) , fax: (202) ]. 51. Comments concerning the information collections proposed in this NOPR, and the associated burden estimates, should be sent to the Commission in this docket and may also be sent to the Office of Management and Budget, Office of Information and Regulatory Affairs, Washington, DC [Attention: Desk Officer for the Federal Energy Regulatory Commission]. For security reasons, comments should be sent by to OMB at the following address: oira_submission@omb.eop.gov. Please reference FERC-921 and OMB Control No in your submission.